BAE Systems would lay off 800 employees with Bradley production shutdown

Arlington-based BAE Systems Inc. will need to lay off 800 employees during the next year if talks with the Army fail to stop a shutdown in production of the company's Bradley infantry fighting vehicle, said BAE's top executive in charge of the program.

The company has begun a lobbying effort to avoid a three-year suspension of Bradley production work done primarily at a plant in York, Pa.

"In the Army's view, they have this holiday period where they don't believe they have a need for either continued refurbishment or any additional vehicles," said Mark Signorelli, vice president and general manager for BAE's Armored Combat Systems business. "But for us, it means that we will start to see layoffs — significant ones — by the end of the summer."

He estimated that 800 employees would be laid off, including about 250 at the York facility and workers that support the program from other locations.

"We're already starting to see the impact in our supply base," Signorelli added. "Suppliers always lead the production, and many have filled their last outstanding orders. They're getting nervous about what the future looks like."

BAE estimates that 7,500 workers from the supply chain would lose their jobs if production came to a halt.

The company is talking with Army about an alternative that would require the military to re-prioritize and reschedule existing efforts tied not only to the Bradley vehicles but also to the M88 Recovery Vehicle and ‪M109 howitzer‬ that also use the York plant for manufacturing. That would to keep the production line going through the proposed hiatus, scheduled to start in 2014.

In 2017, the production line is supposed to be restarted for upgrades to existing Bradley vehicles. At that point, the Army also plans to kick off production of new armored multipurpose vehicles and, soon after, ground combat vehicles, both of which BAE hopes to manufacture.

If production of Bradley vehicles does stop, costs to produce the other vehicles at the York plant will increase, given the lower scale. The cost to shut down and restart Bradley production will be passed along to the government.

If Bradley production lines are closed for three years, the cost to restart them could be up to $700 million, according to company estimates.

"We have largely included in future pricing the impacts of shutting down, and those future contracts will include the costs of restarting," Signorelli said. "But the Army could be more efficient by effectively using that money to sustain production. We're not asking them to buy what they don't need. We're asking them to get value for their money."

A temporary shutdown would be seriously damaging for the company as a whole, said Loren Thompson, chief operating officer of the Lexington Institute think tank.

"Their only real facility for upgrading and assembling is the site in York," he said. "It's also the site where they'd build prototypes. If they don't have enough money to keep the workforce and skills intact, it raises questions about the whole business."

Based on how current dialogue is going, Signorelli is cautiously optimistic that BAE and the Army will come to some resolution.

"Maybe it's because we're at the crisis point, or maybe the dialogue has just taken this long to get going, but we're starting to see more common understanding of the impacts and the costs associated with those," he said.